Overcapacity and rising costs have depressed the average profit margins of Chinese steelmakers to just 3.5 percent in 2010, the lowest of any industry, according to the government. Photographer: Nelson Ching/Bloomberg
Wuhan Iron & Steel Group, Angang New Co. and rival Chinese mills are expanding overseas and turning to specialty products to battle overcapacity in China, the world's biggest producer of the metal.
Wuhan Steel, the nation's fourth-biggest mill, is in talks to build plants or buy rivals in other countries, General Manager Deng Qilin said in Beijing while at the National People's Congress. Angang may develop its specialty steel product business, General Manager Zhang Xiaogang said.
Overcapacity and rising costs have depressed the average profit margins of Chinese steelmakers to just 3.5 percent in 2010, the lowest of any industry, according to the government. The nation's new five-year building program will need more high- grade alloy for railroads and nuclear power plants, China Iron and Steel Association said.
'Every steelmaker is trying to diversify their business," said Hu Yanping, a Beijing-based analyst with researcher UC361.com. "But they aren't all going to succeed."
Wuhan Iron & Steel Co., the listed unit of Wuhan Steel, has fallen 30 percent in Shanghai trading in the past year, compared with a 1.7 percent drop in the benchmark Shanghai Composite Index. Angang Steel Co., Angang's unit, is down 34 percent in the past year in Shenzhen.
The government plans to invest 800 billion yuan ($121 billion) to build 6,000 kilometers (3,700 miles) of high-speed rail lines by 2012 to carry its industrial expansion inland.
Going Overseas
Magang (Group) Holding Co., China's biggest maker of train wheels, plans to expand its steel cutting and equipment manufacturing business, Chairman Gu Jianguo said in an interview at the congress.
The nation's steel demand may increase 3.5 percent this year, compared with a projected 13.6 percent growth in India and 9.1 percent in the Central and South American regions, according to World Steel Association estimates in October.
"The government is encouraging the shift of surplus steel production capacity overseas," Wuhan General Manager Deng said March 7, without giving details on his overseas expansion plans.
Delong Holdings Ltd. (DLNG) a Singapore-listed Chinese steelmaker, is looking to build plants in Mexico and other countries, Chairman Ding Liguo said in an interview while attending the congress. Angang in 2010 signed an agreement to jointly build a $168 million reinforcing bar plant in Mississippi in the U.S.
Building plants overseas is "a way to reduce global steel trade frictions," said Xu Xiangchun, chief analyst with Mysteel Research Institute. Also, it "will be welcomed as a boost to local employment and taxes."
China's steel-product exports gained 73 percent last year to 42.6 million metric tons, customs data show. Apparent steel use in the U.S. will likely advance 9.4 percent this year, the World Steel Association said.
Rising Costs
Asian steelmakers face rising costs. Mills in the region may be forced to pay as much as 44 percent more for hard coking coal in the three months starting April 1 after rain shut mines in Australia, according to the median estimate of 11 analysts surveyed by Bloomberg News. Iron ore prices have jumped 29 percent in the past year, according to the Steel Index.
The nation's largest steelmakers, including Angang and Wuhan Steel, focus primarily on the production of ordinary steel. By moving into specialty products, the larger mills will compete against companies like Xining Special Steel Co. and Shandong Jinling Mining Co.
Xining Special had gross profit margin of 14.65 percent in 2009, compared with 9.68 percent for Baoshan Iron & Steel Co., the biggest-listed Chinese steelmaker, according to data compiled by Bloomberg.
"We're studying to improve our product mix during the 12th Five-Year Plan," which starts this year, Angang's Zhang told reporters on March 5 at the congress. "We have been struggling to make profit at the home market. This five-year period will be our last chance to survive."
(By bloomberg)
Wuhan Iron & Steel Group, Angang New Co. and rival Chinese mills are expanding overseas and turning to specialty products to battle overcapacity in China, the world's biggest producer of the metal.
Wuhan Steel, the nation's fourth-biggest mill, is in talks to build plants or buy rivals in other countries, General Manager Deng Qilin said in Beijing while at the National People's Congress. Angang may develop its specialty steel product business, General Manager Zhang Xiaogang said.
Overcapacity and rising costs have depressed the average profit margins of Chinese steelmakers to just 3.5 percent in 2010, the lowest of any industry, according to the government. The nation's new five-year building program will need more high- grade alloy for railroads and nuclear power plants, China Iron and Steel Association said.
'Every steelmaker is trying to diversify their business," said Hu Yanping, a Beijing-based analyst with researcher UC361.com. "But they aren't all going to succeed."
Wuhan Iron & Steel Co., the listed unit of Wuhan Steel, has fallen 30 percent in Shanghai trading in the past year, compared with a 1.7 percent drop in the benchmark Shanghai Composite Index. Angang Steel Co., Angang's unit, is down 34 percent in the past year in Shenzhen.
The government plans to invest 800 billion yuan ($121 billion) to build 6,000 kilometers (3,700 miles) of high-speed rail lines by 2012 to carry its industrial expansion inland.
Going Overseas
Magang (Group) Holding Co., China's biggest maker of train wheels, plans to expand its steel cutting and equipment manufacturing business, Chairman Gu Jianguo said in an interview at the congress.
The nation's steel demand may increase 3.5 percent this year, compared with a projected 13.6 percent growth in India and 9.1 percent in the Central and South American regions, according to World Steel Association estimates in October.
"The government is encouraging the shift of surplus steel production capacity overseas," Wuhan General Manager Deng said March 7, without giving details on his overseas expansion plans.
Delong Holdings Ltd. (DLNG) a Singapore-listed Chinese steelmaker, is looking to build plants in Mexico and other countries, Chairman Ding Liguo said in an interview while attending the congress. Angang in 2010 signed an agreement to jointly build a $168 million reinforcing bar plant in Mississippi in the U.S.
Building plants overseas is "a way to reduce global steel trade frictions," said Xu Xiangchun, chief analyst with Mysteel Research Institute. Also, it "will be welcomed as a boost to local employment and taxes."
China's steel-product exports gained 73 percent last year to 42.6 million metric tons, customs data show. Apparent steel use in the U.S. will likely advance 9.4 percent this year, the World Steel Association said.
Rising Costs
Asian steelmakers face rising costs. Mills in the region may be forced to pay as much as 44 percent more for hard coking coal in the three months starting April 1 after rain shut mines in Australia, according to the median estimate of 11 analysts surveyed by Bloomberg News. Iron ore prices have jumped 29 percent in the past year, according to the Steel Index.
The nation's largest steelmakers, including Angang and Wuhan Steel, focus primarily on the production of ordinary steel. By moving into specialty products, the larger mills will compete against companies like Xining Special Steel Co. and Shandong Jinling Mining Co.
Xining Special had gross profit margin of 14.65 percent in 2009, compared with 9.68 percent for Baoshan Iron & Steel Co., the biggest-listed Chinese steelmaker, according to data compiled by Bloomberg.
"We're studying to improve our product mix during the 12th Five-Year Plan," which starts this year, Angang's Zhang told reporters on March 5 at the congress. "We have been struggling to make profit at the home market. This five-year period will be our last chance to survive."
Posts
No comments:
Post a Comment